Why I support Cap-and-Trade but Revenue-Neutral would win

Carbon Washington is proposing a revenue-neutral tax on carbon; Alliance for Jobs and Clean Energy is supporting a cap-and-trade approach and generating extra tax revenue. First of all, I support both of them. They propose to reduce carbon emissions and better the environment for Washington State. As a leader from Carbon Washington states, it is a disagreement between friends. If either passed, it would benefit society in regards to the carbon issue. Personally, I would prefer Cap-and-Trade over Revenue-Neutral I-732, but I believe I-732 would get more supporters.

Cap-and-Trade would fundamentally limit the total volume of carbon emissions by setting a cap on major polluters. If one polluter is able to keep under the cap, it could sell the extra cap to others. In a free trade market, the trade price would create an incentive for polluters to stay under the cap more efficiently than under a flat tax approach–in which polluters could actually generate emissions as much as they could afford to pay. Although Cap-and-Trade is used as an imperfect example in my previous economics class, I would still choose it to control carbon emissions.

In addition, Cap-and-Trade raises an annually one billion increase in state revenue. It is proposed to fund special programs in education and transportation. It would also compensate communities which have been heavily impacted by carbon emissions in the past. However, this extra revenue could be the reason Cap-and-Trade would fail to pass. How to use this part of the tax is sensitive to legislators, especially for conservatives. On the other hand, an individual would not be able to measure their benefit from Cap-and-Trade if the program funded from the revenue doesn’t directly impact his/her life.

Meanwhile, the Revenue-Neutral charges carbon generators based on a flat rate and raises a projected $1.6 billion in taxes. Unlike Cap-and-Trade, Revenue-Neutral would balance the same total tax revenue level and implement a carbon fee to reduce other taxes, such as sales tax as Carbon Washington proposed. Carbon Washington is smart on the proposal to maintain the same tax revenue and creates benefit to the general population. It really draws individual supporters because this approach directly helps them save in daily life, and this reaction from voters would change the result dramatically for legislation. Furthermore, legislation would not feel stressful to determine appropriate way to utilize extra revenue.

To combine both approaches would be to use Cap-and-Trade to raise tax revenue and keep it Revenue-Neutral to avoid rejection from legislators and voters.


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